UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: December 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____ to ____
Commission File No. 0-024970
ALL-AMERICAN SPORTPARK, INC.
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(Name of Small Business Issuer in its Charter)
NEVADA 88-0203976
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(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication No.)
6730 South Las Vegas Boulevard, Las Vegas, NV 89119
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(Address of Principal Executive Offices, Including Zip Code)
Issuer's Telephone Number: (702) 798-7777
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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(Title of each class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year: $2,238,658.
As of March 31, 2008, 3,502,000 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by non-
affiliates was approximately $330,000.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Documents Incorporated By Reference: None.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
The Company's business began in 1974 when Vaso Boreta, the Company's
Chairman of the Board, opened a "Las Vegas Discount Golf & Tennis" retail
store in Las Vegas, Nevada. This store, which is still owned by Mr. Boreta,
subsequently began distributing catalogs and developing a mail order business
for the sale of golf and tennis products. In 1984, the Company began to
franchise the "Las Vegas Discount Golf & Tennis" retail store concept and
commenced the sale of franchises. As of February 26, 1997, when the franchise
business was sold, the Company had 43 franchised stores in operation in 17
states and 2 foreign countries.
The Company was incorporated in Nevada on March 6, 1984, under the name
"Sporting Life, Inc." The Company's name was changed to "St. Andrews Golf
Corporation" on December 27, 1988, to "Saint Andrews Golf Corporation" on
August 12, 1994, and to All-American SportPark, Inc. ("AASP") on December 14,
1998.
Sports Entertainment Enterprises, Inc. ("SPEN"), formerly known as Las
Vegas Discount Golf & Tennis, Inc. ("LVDG"), a publicly traded company,
acquired the Company in February 1988, from Vaso Boreta, who was the Company's
sole shareholder. Vaso Boreta also served as SPEN's Chairman of the Board,
President and CEO until February 2005.
In December 1994, the Company completed an initial public offering of
1,000,000 Units, each Unit consisting of one share of Common Stock and one
Class A Warrant. The net proceeds to the Company from this public offering
were approximately $3,684,000. The Class A Warrants expired unexercised on
March 15, 1999.
In 1996, the Company sold 500,000 shares of Series A Convertible
Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of SANYO North
America Corporation, for $5,000,000 in cash pursuant to an Investment
Agreement between the Company and TOI. The Company used these proceeds to
fund part of the development costs of its All-American SportPark property in
Las Vegas. In March 2001, the Company repurchased all of the shares of Series
A Convertible Preferred Stock from TOI for $5,000 in cash. Once repurchased,
the shares were retired.
On December 16, 1996, the Company and its majority shareholder, SPEN,
entered into negotiations pursuant to an "Agreement for the Purchase and Sale
of Assets" to sell all but one of the four retail stores owned by SPEN, all of
SPEN's wholesale operations and the entire franchising business of the Company
to Las Vegas Golf & Tennis, Inc., an unaffiliated company. On February 26,
1997, the Company and SPEN completed this transaction.
In connection with the sale of the above-described assets, SPEN and the
Company agreed not to compete with the buyer in the golf equipment business
except that the Company is permitted to sell golf equipment at its Callaway
Golf Center business. In addition, the Buyer granted Boreta Enterprises,
Ltd., a limited partnership owned by Vaso Boreta, Ron Boreta, Vaso's son and
President of the Company, and John Boreta, Vaso's son and a principal
shareholder of SPEN, the right to operate "Las Vegas Discount Golf & Tennis"
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stores in southern Nevada, except for the Summerlin area of Las Vegas, Nevada.
Likewise, the buyer is restricted from operating stores in southern Nevada
except for the Summerlin area of Las Vegas, Nevada.
On July 12, 1996, the Company entered into a lease agreement covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
developed its Callaway Golf Center and All-American SportPark ("SportPark")
properties. The property is located on the world famous Las Vegas "Strip" at
the corner of Las Vegas Boulevard and Sunset Road which is just south of
McCarran International Airport and several of Las Vegas' major hotel/casino
properties such as Mandalay Bay and the MGM Grand. The property is also
adjacent to the Interstate 215 beltway that will eventually encircle the
entire Las Vegas valley. On 42 acres of the property is the Callaway Golf
Center that opened for business in October 1997. The remaining 23 acres was
home to the discontinued SportPark that opened for business in October 1998
and was disposed of in May 2001.
On June 20, 1997, the lessor of the 65-acre tract ("Landlord") agreed
with the Company to cancel the original lease and replace it with two separate
leases. The lease for the SportPark commenced on February 1, 1998 with a base
rent of $18,910 per month and was cancelled in connection with the disposition
of the SportPark in May 2001; the lease for the Callaway Golf Center is for
fifteen years with options to extend for two additional five-year terms. The
lease for the Callaway Golf Center[TM] commenced on October 1, 1997 when the
golf center opened with a base rent of $33,173 per month.
During June 1997 the Company and Callaway Golf Company ("Callaway")
formed All-American Golf LLC ("LLC"), a California limited liability company
that was owned 80% by the Company and 20% by Callaway; the LLC owned and
operated the Callaway Golf Center. In May 1998, the Company sold its 80%
interest in LLC to Callaway. On December 31, 1998 the Company acquired
substantially all the assets of LLC subject to certain liabilities that
resulted in the Company owning 100% of the Callaway Golf Center.
On October 19, 1998 the Company sold 250,000 shares of the Series B
Convertible Preferred Stock to SPEN for $2,500,000. SPEN had earlier issued
2,303,290 shares of its common stock for $2,500,000 in a private transaction
to ASI Group, L.L.C. ("ASI"). ASI also received 347,975 stock options for
SPEN common stock. ASI is a Nevada limited liability company whose members
include Andre Agassi, a professional tennis player.
SPEN owned 2,000,000 shares of the Company's common stock and 250,000
shares of the Company's Series B Convertible Preferred Stock. In the
aggregate, this represented approximately two-thirds ownership in the Company.
On April 5, 2002, SPEN elected to convert its Series B Convertible Preferred
Stock into common stock on a 1 for 1 basis. On May 8, 2002, SPEN completed a
spin-off of the Company's shares held by SPEN to SPEN's shareholders. This
resulted in SPEN no longer having any ownership interest in the Company.
BUSINESS OF THE COMPANY
In June 1997, the Company completed a final agreement with Callaway to
form a limited liability company named All-American Golf LLC (the "LLC") for
the purpose of operating a golf facility, to be called the "Callaway Golf
Center[TM] ("CGC")," on approximately forty-two (42) acres of land located on
Las Vegas Boulevard in Las Vegas, Nevada. The CGC opened to the public on
October 1, 1997.
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The Company's operations consist of the CGC, located on 42 acres of
leased land and strategically positioned within a few miles of the largest
hotels and casinos in the world. There are over 132,000 hotel rooms in Las
Vegas with an average occupancy of 89.7%, and seventeen of the top twenty
largest hotels in the world are within a few miles of the CGC including the
MGM Grand, Mandalay Bay, Luxor, Bellagio, and the Monte Carlo. The CGC is
also adjacent to McCarran International Airport, the fifth busiest airport in
the world for passenger traffic. McCarran International Airport had it busiest
year in its history with 47.7 million passengers passing through the terminal
in 2007. The Las Vegas valley residential population approximates 2.0
million.
The CGC includes a two tiered, 110-station, driving range. The driving
range is designed to have the appearance of an actual golf course with ten
impact greens, waterfall features, and an island green. Pro-line equipment
and popular brand name golf balls are utilized. In addition to the driving
range, the CGC has a lighted, nine-hole, par three golf course, named the
"Divine Nine." The golf course has been designed to be challenging, and has
several water features including lakes, creeks, water rapids and waterfalls,
golf cart paths and designated practice putting and chipping areas. At the
entrance to the CGC is a 20,000 square foot clubhouse which includes an
advanced state of the art golf swing analyzing system developed by Callaway,
and two tenant operations: (a) the St. Andrews Golf Shop featuring the latest
in Callaway Golf equipment and accessories, and (b) a restaurant, which
features an outdoor patio overlooking the golf course and driving range with
the Las Vegas "Strip" in the background.
The CGC has a lease agreement with St. Andrews Golf Shop for the
provision of sales of golf retail merchandise. The lease is for fifteen years
ending in October 2012. The lessee pays a fixed monthly rental for its office
and retail space.
The LLC's original ownership was 80% by the Company and 20% by Callaway.
Callaway agreed to contribute $750,000 of equity capital and loan the LLC
$5,250,000. The Company contributed the value of expenses incurred relating to
the design and construction of the golf center and cash in the combined amount
of $3,000,000. Callaway's loan to the LLC had a ten-year term with interest
at ten percent per annum. The principal was due in 60 equal monthly payments
commencing five years after the CGC opened.
On May 5, 1998, the Company sold its 80% interest in the LLC to Callaway
for $1.5 million in cash and the forgiveness of $3 million in debt, including
accrued interest thereon, owed to Callaway by the Company. The Company
retained the option to repurchase the 80% interest for a period of two years
on essentially the same financial terms that it sold its interest. The sale
of the Company's 80% interest in the LLC was completed in order to improve the
Company's financial condition that, in turn, improved the Company's ability to
complete the financing needed for the final construction stage of the
SportPark.
On December 30, 1998, the Company acquired substantially all the assets
of the LLC subject to certain liabilities. This resulted in the Company
owning 100% of the CGC. Under the terms of the asset purchase agreement, the
Company paid $1 million to Active Media Services in the form of a promissory
note payable in quarterly installments of $25,000 over a 10-year period
without interest. In turn, Active Media delivered a trade credit of
$4,000,000 to the Callaway Golf Company.
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In connection with this acquisition, the Company executed a trademark
license agreement with Callaway pursuant to which the Company licenses the
right to use the marks "Callaway Golf Center" and "Divine Nine" from Callaway
for a term beginning on December 30, 1998 and ending upon termination of the
land lease on the CGC. The Company paid a one-time fee for this license
agreement that was a component of the purchase price the Company paid for the
CGC upon acquisition of the facility on December 30, 1998. Pursuant to this
agreement, Callaway has the right to terminate the agreement upon the
occurrence of any "Event of Termination" as defined in the agreement.
On June 1, 2001, the Company completed a transaction pursuant to a
Restructuring and Settlement Agreement with Urban Land of Nevada, Inc. (the
"Landlord") to terminate the land lease for the discontinued SportPark, and to
transfer all of the leasehold improvements and personal property located on
the premises to the Landlord.
As part of the agreement, the Landlord agreed to waive all liabilities of
the Company to the Landlord with respect to the discontinued SportPark, and
with the exception of a limited amount of unsecured trade payables, the
Landlord agreed to assume responsibility of all other continuing and
contingent liabilities related to the SportPark. The Landlord also agreed to
cancel all of the Company's back rent obligations for the CGC for periods
through April 30, 2001. The CGC remains the only operating business of the
Company.
As part of the transaction, the Company transferred to the Landlord a 35
percent ownership interest in the Company's subsidiary that owns and operates
the CGC. This subsidiary is All-American Golf Center, Inc. ("AAGC"). In
connection with the issuance of the 35 percent interest in AAGC to the
Landlord, the Company and the Landlord entered into a Stockholders Agreement
that provides certain restrictions and rights on the AAGC shares issued to the
Landlord. The Landlord is permitted to designate a non-voting observer of
meetings of AAGC's Board of Directors. In the event of an uncured default of
the lease for the CGC, so long as the Landlord holds a 25% interest in AAGC,
the Landlord will have the right to select one director of AAGC. As to matters
other than the election of Directors, the Landlord has agreed to vote its
shares of AAGC as designated by the Company.
LIABILITY INSURANCE
The Company has a comprehensive general liability insurance policy to
cover possible claims for injury and damages from accidents and similar
activities. Although management of the Company believes that its insurance
levels are sufficient to cover all future claims, there is no assurance it
will be sufficient to cover all future claims.
MARKETING
The marketing program for the CGC is focused primarily on the local
individual customers with increasing emphasis on the individual tourist market
because of the CGC's proximity to most of the major resorts in Las Vegas. The
CGC focuses its marketing efforts principally on print media that has proven
to be effective for the local market. For the tourist market, the Company has
instituted taxi programs, rack cards, and print media in tourist publications
that are located in the Las Vegas hotels and hotel rooms. Also, the CGC, has
implemented programs to attract more group events, clinics, and other special
promotional events. In February of 2004, a 30 ft. pylon sign with a reader
board was installed in front of the CGC. The sign makes the general public
5
aware of various programs, specials and information on events and other
activities taking place within the CGC. Once installed, the CGC began random
customer information surveys to provide information on how guests heard of the
CGC. Over half stated that they came into the CGC because they saw the new
sign.
The CGC, which includes a nine-hole par 3 golf course, driving range, and
clubhouse, is designed to provide a country club atmosphere for the general
public.
The Company's marketing efforts toward establishing additional CGC-type
locations have been directed towards a number of large existing and potential
markets for which there can be no assurance of financial success. Further, to
expand the concept for CGC-type facilities beyond the Las Vegas location could
require considerably more financial and human resources than presently exists
at the Company.
FIRST TEE PROGRAM
In March 2002, the CGC became the official home in southern Nevada for
the national First Tee program. The First Tee program is a national
initiative started in November 1997 by the World Golf Foundation. First Tee
is a program sponsored by the PGA Tour, the LPGA, the PGA of America, the
United States Golf Association, and Augusta National Golf Club. The First Tee
program was formed to eliminate access and affordability issues for children,
especially economically disadvantaged children, to participate in the game of
golf. In research conducted by the National Golf Foundation, it was noted
that only two percent of children through age 17 ever try golf and only five
percent of our nation's golfers were minorities. The CGC is proud to be part
of the First Tee program and believes it will offer many opportunities for the
Company in the years ahead.
COMPETITION
Any golf/amusement facilities developed by the Company will compete with
any other family/sports attractions in the area where such facilities are
located. Such attractions could include amusement parks, driving ranges,
water parks, and any other type of family or sports entertainment. The
Company will be relying on the combination of active user participation in the
sports activities and uniqueness of the Park features, attractive designs, and
competitive pricing to encourage visitation and patronage.
In the Las Vegas market, the Company has competition from other golf
courses, family entertainment centers, and entertainment provided by
hotel/casinos. Company management believes the CGC has a competitive
advantage in the Las Vegas market because of its strategic location, product
branding, alliances, and extent of facilities balanced with competitive
pricing that is unlike any competitor in the market.
The Company's competition includes other golf facilities within the Las
Vegas area that provide a golf course and driving range combination and/or a
night lighted golf course. Management believes that the CGC is able to
compete because it is unique in providing a branded partnership with Callaway
and giving the Las Vegas community one of the largest golf training facilities
in the western United States. In addition, several Las Vegas hotel/casinos
own their own golf courses that cater to high-roller/VIP tourists. The CGC is
able to compete against these facilities because it offers a competitively
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priced golf facility with close proximity to the Las Vegas "Strip" properties
where a non-high-roller/VIP tourist can come to enjoy a Las Vegas golf
experience.
EMPLOYEES
As of March 31, 2007, there were 4 full-time and 1 part-time employees at
the Company's executive offices, and 9 full-time and 16 part-time employees at
CGC.
ITEM 2. DESCRIPTION OF THE PROPERTY.
The Company's corporate offices are located inside the clubhouse building
of the CGC at 6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119. The
CGC property occupies approximately 42 acres of leased land described in ITEM
1. DESCRIPTION OF BUSINESS, BUSINESS DEVELOPMENT. The CGC was opened October
1, 1997. The property is in good condition both structurally and in
appearance. There were certain construction defects that are discussed below
in ITEM 3. LEGAL PROCEEDINGS. There were minor defects to the building but
they have been repaired. Other construction not related to the building
involved adjoining concrete sidewalks and walkways. Temporary repairs have
been made and a permanent correction will be made upon final settlement of the
lawsuit. The Company owns 65% of the CGC through its subsidiary, AAGC.
A ten-year note payable secured by a first deed of trust exists on the
CGC in the original amount of $1 million payable without interest, in
quarterly installments of $25,000 beginning December 1998.
The CGC has two tenant operations: (1) The St. Andrews Golf Shop that
occupies approximately 4,300 square feet for golf retail sales and pays a
fixed monthly rent that includes a prorated portion of maintenance and
property tax expenses of $13,104 for its retail and office space. The lease
is for fifteen years ending in 2012, and (2) a restaurant that features an
outdoor patio overlooking the golf course and driving range with the Las Vegas
"Strip" in the background. Beginning in the first quarter of 2007, restaurant
lease revenue will be equal $4,160 per month. If the lease is extended the
minimum rent shall increase by 4% per year and every year thereafter. The
lease expired in first quarter of 2007 and the lessee exercised the option to
continue operations at the CGC for an additional four-year period.
ITEM 3. LEGAL PROCEEDINGS
Except for the complaints described in the following paragraphs, the
Company is not presently a party to any legal proceedings, except for routine
litigation that is incidental to the Company's business.
The Company was plaintiff in a lawsuit against Western Technologies and
was awarded a judgment of $660,000 in March 2003. Western Technologies had
appealed the judgment to the Nevada Supreme Court (the "Court"). Western
Technologies was required to and did file a bond in the amount of the judgment
to date, which was approximately $1,180,000 including the judgment, interest,
and attorney's fees. In October 2006, the "Court" ruled in favor of the
defendant, but it wasn't until August 2007 that an agreement was reached and
all parties signed a Settlement Agreement. The company received a total of
$550,000 and a net after attorney's fees of $300,000, which was used to finish
repairs on the facility and for some upgrades.
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On May 31, 2005, Sierra SportService, Inc. the Company's tenant, who
operated the restaurant in CGC, ceased operations. Sierra SportService filed
a notice of default pertaining to the restaurant concession agreement and
against all guarantors of that agreement. A settlement was reached on
November 18, 2005 for a total amount of $800,000, of which the AASP paid
$700,000 and the remaining $100,000 was paid by AAGC, which is 65% owned by
the Company. The funds used to make these payments were borrowed from ANR,
LLC, an entity owned by Andre K. Agassi and Perry Craig Rogers.
In December 2005, the Company commenced an arbitration proceeding before
the American Arbitration Association against Urban Land of Nevada ("Urban
Land") seeking reimbursement of the $800,000 paid in settlement of the Sierra
SportService matter plus fees and costs pursuant to the terms of the Company's
agreements with Urban Land which owns the property on which the CGC is
located. Urban Land filed a counterclaim against the Company seeking to
recover damages related to back rent allegedly owed by Company of
approximately $600,000. In addition, Urban land claims the Company misused an
alleged $880,000 settlement related to construction defects lawsuits. An
arbitrator has been appointed in the American Arbitration Association and
arbitration is scheduled for July 2008.
Urban land has also filed another lawsuit against the Company and claims
against other parties in the arbitration proceeding. The claims against the
Company remain essentially identical to the claims above. The other parties
include, among others, Ronald S. Boreta, the President of the Company; Vaso
Boreta, Chairman of the Board of the Company; and Boreta Enterprise, Ltd., a
principal shareholder of the Company. The other party claims allege that the
Company and others defrauded otherwise injured Urban Land in connection with
Urban Land entering into certain agreements in which the Company is a party.
The Company has filed a motion to dismiss against the plaintiff's claims in
this lawsuit but the Court provided the plaintiff with a limited amount of
discovery. The discovery process began in 2007 and depositions were taken in
September. The hearing before the American Arbitration Association is
scheduled for July 2008.
On February 10, 2006, Urban Land filed a notice of default on the CGC
ground lease claiming that certain repairs to the property had not been
performed or documented. The Company filed a lawsuit in the Eighth Judical
District Court of Clark County Nevada to prevent Urban Land from declaring the
Company in default of its lease. The claims in the notice of default have been
added to the above arbitration proceeding. A Summary Judgment was awarded to
the Company in February 2008 in this proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION. The Company's common stock is traded in the over-
the-counter market and is quoted on the OTC Bulletin Board under the symbol
AASP. The following table sets forth the high and low sales prices of the
common stock for the periods indicated. The quotations reflect inter-dealer
prices, without retail markup, markdown or commission and may not represent
actual transactions.
HIGH LOW
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Year Ended December 31, 2007:
First Quarter $0.40 $0.17
Second Quarter $0.40 $0.25
Third Quarter $0.29 $0.16
Fourth Quarter $0.69 $0.17
Year Ended December 31, 2006:
First Quarter $0.47 $0.25
Second Quarter $0.33 $0.18
Third Quarter $0.25 $0.19
Fourth Quarter $1.85 $0.17
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at February 28, 2007 was approximately 1,040. This does
not include approximately 1,000 shareholders who hold stock in their accounts
at broker/dealers.
DIVIDENDS. Holders of common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No
dividends have been paid with respect to the Company's common stock and no
dividends are expected to be paid in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings to provide for
the growth of the Company. Payment of cash dividends in the future will
depend, among other things, upon the Company's future earnings, requirements
for capital improvements and financial condition.
SALES OF UNREGISTERED SECURITIES. There were no sales of unregistered
securities during the quarter ended December 31, 2007.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following information should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto included in
this report.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). In
connection with the preparation of the financial statements, we are required
to make assumptions and estimates about future events that affect the reported
amounts of assets, liabilities, revenue, expenses and the related disclosures.
We base our assumptions and estimates on historical experience and other
factors that management believes is relevant at the time our consolidated
financial statements are prepared. On a periodic basis, management reviews
9
the accounting policies, assumptions and estimates to ensure that our
financial statements are presented fairly and in accordance with GAAP.
However, because future events and their effects can not be determined with
certainty, actual results could differ from the estimates and assumptions, and
such differences could be material.
Our significant accounting policies are discussed in Note 2, Summary of
Significant Accounting Policies in the Notes to the Consolidated Financial
Statements. The following accounting policies are most critical in fully
understanding and evaluating our reported financial results.
Stock Based Compensation
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 123, ("SFAS 123R"), Share Based Payment. This SFAS requires the Company
to measure the cost of employee stock-based compensation awards granted based
on the grant date fair value of those awards and to record the cost as
compensation expense over the period during which the employee is required to
perform services in exchange for the award (generally over the vesting period
of the award). The Company currently does not have any options that are not
fully vested.
Leasehold Improvements and Equipment
Leasehold improvements and equipment are stated at cost and are
depreciated or amortized using the straight-line basis over the lesser of the
lease term (including renewal periods, when the Company has both the intent
and ability to extend the lease) or the useful lives of the assets, generally
3 to 15 years.
Revenues
The Company primarily earns revenue from golf course green fees, driving
range ball rentals and golf and cart rentals which are recognized when
received as payments for the services provided. Lease and sponsorship
revenues are recognized as appropriate when earned.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued FASB Statement No. 157, "Fair Value
Measurements" (SFAS 157). The standard provides guidance for using fair value
to measure assets and liabilities. The standard also responds to investors'
requests for expanded information about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurements on earnings. The standard
applies whenever other standards require or permit assets or liabilities to be
measured at fair value. The standard does not expand the use of fair value in
any new circumstances. SFAS 157 must be adopted prospectively as of the
beginning of the year it is initially applied. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. The Company is currently
evaluating the impact this standard will have on its consolidated financial
statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities" (SFAS 159). SFAS 159 allows
entities the option to measure eligible financial instruments at fair value as
of specified dates. Such election, which may be applied on an instrument by
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instrument basis, is typically irrevocable once elected. SFAS 159 is effective
for fiscal years beginning after November 15, 2007, and early application is
allowed under certain circumstances. The Company does not expect the adoption
of SFAS 159 to have a material impact on its consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141R) which replaces SFAS No. 141. SFAS 141R retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired
and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. SFAS 141R is
effective for the Company beginning January 1, 2009 and will apply
prospectively to business combinations completed on or after that date. The
Company does not expect the adoption of SFAS 141R to have a material impact on
its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB 51" (SFAS 160) which
changes the accounting and reporting for minority interests. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net income
attributable to the noncontrolling interest will be included in consolidated
net income on the face of the income statement and, upon a loss of control,
the interest sold, as well as any interest retained, will be recorded at fair
value with any gain or loss recognized in earnings. SFAS No. 160 is effective
for the Company beginning January 1, 2009 and will apply prospectively, except
for the presentation and disclosure requirements, which will apply
retrospectively. The Company does not expect the adoption of SFAS 160 to have
a material impact on its consolidated financial statements.
OVERVIEW
The Company's operations consist of the management and operation of the
CGC. The CGC includes the Divine Nine par 3 golf course fully lighted for
night golf, a 110-tee two-tiered driving range, a 20,000 square foot clubhouse
which includes the Callaway Golf fitting center and Pro Shop and two tenants,
the Saint Andrews Golf Shop retail store and a restaurant.
The CGC has an ideal location at the end of the "Las Vegas Strip" and
near the international airport; however, much of the land immediately adjacent
to the CGC has not yet been developed.
The Town Square project which opened in November 2007 is expected to
result in increased revenues for the golf center. The Town Square is a 1.5
million square foot super regional lifestyle center with a mix of retail,
dining and office space that is being developed across the street from the
CGC. In addition, the continued aggressive level of growth at the south end
of the Las Vegas strip is expected to draw more local and tourist business to
the golf center.
11
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2007 VERSUS YEAR ENDED
DECEMBER 31, 2006.
REVENUES. Revenues of the Callaway Golf Center ("CGC") for 2007
increased 1.4% or $30,679 to $2,238,658 compared to $2,207,979 in 2006. Golf
course green fees increased by $32,477 to $688,057 in 2007 compared to
$655,580 in 2006 due to a mild and very active first and second quarter.
Driving range revenue was flat year over year with an increase of $997 for
2007. Golf club rentals increased slightly to $110,458 in 2007 compared to
$104,451 in 2006. Golf lesson fees decreased to $196,572 in 2007 as compared
to $222,286 in 2006. This was due to a loss of several golf professionals at
the beginning of 2007 and an unseasonably hot summer. Tenant income increased
by $9,760 to $207,008 in 2007 compared to $197,248 in 2006. This is due to
the restaurant being open for the full year in 2007.
COST OF REVENUES. Costs of revenues increased by 7.4% or $44,171 to
$641,934 in 2007 compared to $597,763 in 2006. Payroll costs increased
$24,096 in 2007 due to more employees electing benefits in 2007. Other cost of
goods, mainly comprised of driving range supplies like golf balls and
miscellaneous supplies, increased by $23,205 to $84,707 in 2007 compared to
$61,502 in 2006.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased by 1.6% or $32,898 to $2,099,458 in
2007 from $2,066,560 in 2006. Occupancy expense increased by $49,315 from
$773,508 in 2006 to $822,823 in 2007. This increase was related to an
increase in rent due to the lease agreement and an increase in utilities as
those costs continue to rise. Salaries decreased by $44,814 due to a change in
the method of allocating salaries among the Company and certain related
entities for administrative tasks. Other operating expenses increased by
$62,593 as a result of an increase in legal expenses of $73,244 for the
arbitration proceeding with Urban Land and the settlement of Western
Technologies discussed in Item 3 - Legal Proceedings of this report.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
10.2% to $82,442 in 2007 compared to $74,842 in 2006 due to adding several new
fixed assets in 2007.
OTHER INCOME AND INTEREST EXPENSE. Interest expense increased slightly
by $36,723 to $541,270 in 2007 compared to $504,547 in 2006 due to the
issuance of additional notes payable to related parties. Other income in 2007
includes $300,000 from the settlement with Western Technologies discussed in
Item 3 - Legal Proceedings of this report.
NET LOSS. In 2007, the net loss was $825,476 as compared to a loss of
$887,475 in 2006. This reduction in the net loss was due to the receipt of
proceeds from the settlement agreement from Western Technologies in 2007.
LIQUIDITY AND CAPITAL RESOURCES
Working capital needs have been helped by favorable payment terms and
conditions included in our notes payable to related parties. Management
believes that additional notes could be negotiated, if necessary, with similar
payment terms and conditions.
The Company has various notes payable to related parties (ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS). In December 2007, three
12
notes totaling $110,000 and related interest of $102,788 were to mature but
the maturity dates were extended until June 30, 2008. In December 2006, four
notes totaling $220,000 and related interest of $223,651 were to mature but
the maturity dates were extended until March 31, 2007. This extension has
also been extended until June 30, 2008.
In 2007 and 2006, the Company's cash flows used in investing activities
consisted of cash expenditures of approximately $117,000 and $41,300 for
capital asset additions. The proceeds of loans from related parties of
approximately $121,876 and $216,522, net of current year repayments,
constitutes substantially all of the Company's financing cash activities.
We believe that continued development of the south strip directly
adjacent the property will continue to result in increased revenues.
Nevertheless, for reasons described below and in Note 1.d. to the
consolidated financial statements, in its report dated August 6, 2008 the
Company's independent auditors have expressed substantial doubt as to the
Company's ability to continue as a going concern.
As of December 31, 2007, the Company had a working capital deficit of
$8,470,008 as compared to a working capital deficit of $2,874,740 at December
31, 2006. The increase in the working capital deficit is primarily due to the
operating losses experienced during 2007. The Company received funds from
related parties to cover the deficiency. New notes were issued to the related
parties in connection with these loans.
AASP management believes that its continuing operations may not be
sufficient to fund operating cash needs and debt service requirements over at
least the next 12 months. As such, management plans on seeking other sources
of funding as needed, which may include Company officers or directors or other
related parties. In addition, management continues to analyze all operational
and administrative costs of the Company and has made and will continue to make
the necessary cost reductions as appropriate.
Management continues to seek out financing to help fund working capital
needs of the Company. In this regard, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing or
with terms acceptable to the Company.
Among its alternative courses of action, management of the Company may
seek out and pursue a business combination transaction with an existing
private business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. There is no assurance that the
Company will acquire a favorable business opportunity through a business
combination. In addition, even if the Company becomes involved in such a
business opportunity, there is no assurance that it would generate revenues or
profits, or that the market price of the Company's common stock would be
increased thereby.
There are no planned material capital expenditures in 2008.
13
FORWARD LOOKING STATEMENTS
Certain information included in this annual report contains statements
that are forward-looking, such as statements relating to plans for future
expansion and other business development activities, as well as other capital
spending, financing sources, the effects of regulations and competition. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
by or on behalf of the Company. These risks and uncertainties include, but are
not limited to, those relating to dependence on existing management, leverage
and debt service (including sensitivity to fluctuations in interest rates),
domestic or global economic conditions (including sensitivity to fluctuations
in foreign currencies), changes in federal or state tax laws or the
administration of such laws, changes in regulations and application for
licenses and approvals under applicable jurisdictional laws and regulations.
ITEM 7. FINANCIAL STATEMENTS.
The consolidated financial statements are set forth on pages F-1 through
F-16 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On April 17, 2006, Piercy Bowler Taylor and Kern ("PBTK") notified the
Company that it would decline to stand for reappointment as the Company's
independent registered public accounting firm, effective immediately.
PBTK performed audits of the Company's consolidated financial statements
for the fiscal years ended December 31, 2005 and 2004. PBTK's reports did not
contain an adverse opinion or disclaimer of opinion. However, PBTK's reports
did include an explanatory paragraph relating to the Company's ability to
continue as a going concern.
During the fiscal years ended December 31, 2005 and 2004 and through
April 17, 2006, (i) there have been no disagreements with PBTK on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement(s), if not resolved to PBTK's
satisfaction, would have caused PBTK to make reference to the subject matter
of the disagreement(s) in connection with its reports for such year, and (ii)
there were no "reportable events" as such term is defined in Item
304(a)(1)(iv) of Regulation S-B.
On May 10, 2006, the Company engaged the accounting firm of L.L.
Bradford & Company, LLC ("L.L. Bradford") to serve as the Company's
independent registered public accounting firm. Through May 10, 2006, neither
the Company nor anyone on its behalf consulted with L.L. Bradford with respect
to the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered
on the Company's financial statements, or any other matter or reportable event
as set forth in Item 304 of Regulation S-B.
14
ITEM 8A(T). CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
As of December 31, 2007, under the supervision and with the participation
of the Company's Chief Executive Officer and Principal Financial Officer,
management has evaluated the effectiveness of the design and operations of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Principal Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of December 31,
2007.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in the
Securities Exchange Act of 1934 Rule 13a-15(f).
Our Chief Executive Officer and Chief Financial Officer conducted an
evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control - Integrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO Framework"). Based on our evaluation under the COSO Framework, our
management concluded that our internal control over financial reporting was
not effective as of December 31, 2007 relating to procedures in accounting for
debt forgiveness from a related party and rent expense in relation to the
Company's land lease. The debt forgiveness was originally recorded as other
income from the extinguishment of debt from related parties which resulted in
an adjustment to correctly record the debt extinguishment as a capital
contribution. Additionally, the Company determined that it had not correctly
accounted for its land lease in accordance with the Statement of Financial
Accounting Standards No. 13 - Accounting for Leases ("SFAS 13"). SFAS 13
provides that operating leases with fixed rent escalations should be
recognized on a straight-line basis over the lease term.
Management believes that the financial statements included in this report
fairly present in all material respects our financial condition, results of
operations and cash flows for the period presented. In addition we are
working to identify and implement corrective actions, where required and
improve our internal controls.
This annual report does not include an attestation report of the
Company's independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting that
occurred during the fourth quarter of the fiscal year covered by this report
that have materially affected, or are reasonably likely to affect, the
Company's internal control over financial reporting.
ITEM 8B. OTHER INFORMATION
None
15
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
------------------ --- ------------------------------------
Ronald S. Boreta 45 President, Chief Executive Officer,
Treasurer, Secretary and Director
Vaso Boreta 73 Chairman of the Board of Directors
Robert R. Rosburg 80 Director
William Kilmer 67 Director
Except for the fact that Vaso Boreta and Ronald Boreta are father and
son, respectively, there is no family relationship between any Director or
Officer of the Company.
The Company does not currently have an audit committee or an "audit
committee financial expert" because it is not legally required to have one and
due to the limited size of the Company's operations, it is not deemed
necessary. The Company presently has no compensation or nominating committee.
All Directors hold office until the next Annual Meeting of Shareholders.
Officers of the Company are elected annually by, and serve at the
discretion of, the Board of Directors.
The following sets forth biographical information as to the business
experience of each officer and director of the Company for at least the past
five years.
RONALD S. BORETA has served as President of the Company since 1992, Chief
Executive Officer (Principal Executive Officer) since August 1994, Principal
Financial Officer since February 2004, and a Director since its inception in
1984. The Company has employed him since its inception in March 1984, with the
exception of a 6-month period in 1985 when he was employed by a franchisee of
the Company located in San Francisco, California. Prior to his employment by
the Company, Mr. Boreta was an assistant golf professional at San Jose
Municipal Golf Course in San Jose, California, and had worked for two years in
the areas of sales and warehousing activities with a golf discount store in
South San Francisco, California. Mr. Boreta devotes 90% of his time to the
business of the Company.
VASO BORETA has served as Chairman of the Board of Directors since August
1994, and has been an Officer and Director of the Company since its formation
in 1984. In 1974, Mr. Boreta first opened a specialty business named "Las
Vegas Discount Golf & Tennis," which retailed golf and tennis equipment and
accessories. He was one of the first retailers to offer pro-line golf
merchandise at a discount. He also developed a major mail order catalog sales
program from his original store. Mr. Boreta continues to operate his original
16
store, which has been moved to a new location near the corner of Flamingo and
Paradise roads in Las Vegas. Mr. Boreta devotes approximately ten percent of
his time to the business of the Company.
ROBERT R. ROSBURG has served as a Director of the Company since August
1994. Mr. Rosburg has been a professional golfer since 1953. From 1953 to
1974 he was active on the Professional Golf Association tours, and since 1974
he has played professionally on a limited basis. Since 1975 he has been a
sportscaster on ABC Sports golf tournament telecasts. Since 1985 he has also
been the Director of Golf for Rams Hill Country Club in Borrego Springs,
California. Mr. Rosburg received a Bachelor's Degree in Humanities from
Stanford University in 1948.
WILLIAM KILMER has served as a Director of the Company since August 1994.
Mr. Kilmer is a retired professional football player, having played from 1961
to 1978 for the San Francisco Forty-Niners, the New Orleans Saints and the
Washington Redskins. Since 1978, he has toured as a public speaker and also
has served as a television analyst. Mr. Kilmer received a Bachelor's Degree
in Physical Education from the University of California at Los Angeles.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
director, officer, beneficial owner of more than ten percent of the Company's
common stock, failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year.
CODE OF ETHICS
The Board of Directors adopted a Code of Ethics on March 26, 2008. The
Code of Ethics is attached as Exhibit 14 to this report.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the year
ended December 31, 2007 by the Company's President. The Company has no other
executive officers.
17
SUMMARY COMPENSATION TABLE
_________________________________________________________________________________________________
Change in
Pension
Value and
and Non-
qualified
Non-Equity Deferred All
Incentive Com- Other
Name and Stock Option Plan sation Compen-
Principal Salary Bonus Awards Awards Compen- Earnings sation Total
Position Year ($) ($) ($) ($) sation ($) ($) ($) ($)
--------------- ---- -------- ----- ------ ------ ---------- ---------- ------- -------
Ronald S. Boreta
- President 2006 $120,000 0 0 0 0 0 $37,086 $157,086
(1)
2007 $120,000 0 0 0 0 0 $26,872 $146,086
(1)
__________________________________________________________________________________________________
(1) Represents amounts paid for country club memberships for Ronald S. Boreta, and an automobile
and related auto expenses for his personal use. For 2006, these amounts were $12,336 for club
memberships and $24,750 for an automobile. For 2007, these amounts were $9,223 for club
memberships and $17,649 for an automobile.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
There were no outstanding equity awards held by executive officers
at December 31, 2007.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company do not receive any
fees for meetings that they attend, but they are entitled to
reimbursement for reasonable expenses incurred while attending such
meetings. In October 2006, William Kilmer and Robert Rosburg each
received 34,000 shares for their prior services as directors. During
2007, no compensation was paid to the Company's directors for their
services in that capacity.
EMPLOYMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief
Executive Officer, pursuant to which he receives a base salary of
$100,000 per year plus annual increases as determined by the Board of
Directors. His salary was increased to $120,000 beginning the year
ended December 31, 1996. The employment agreement is automatically
extended for additional one-year periods unless 60 days' notice of the
intention not to extend is given by either party. Ronald S. Boreta also
receives the use of an automobile, for which the Company pays all
expenses, and full medical and dental coverage. The Company also pays
18
all dues and expenses for membership at a local country club at which
Ronald S. Boreta entertains business contacts for the Company. Ronald
S. Boreta has agreed that for a period of three years from the
termination of his employment agreement that he will not engage in a
trade or business similar to that of the Company.
SUPPLEMENTAL RETIREMENT PLAN
In November 1996, the Company and its majority shareholder, SPEN
established a Supplemental Retirement Plan, pursuant to which certain
employees selected by the Company's Chief Executive Officer received benefits
based on the amount of compensation elected to be deferred by the employee and
the amount of contributions made on behalf of the employee by the Company.
For 2001, the Company made or accrued contributions to the Supplemental
Retirement Plan on behalf of Ronald S. Boreta (the President of the Company)
in the amount of $3,000. Contributions to this plan ceased in 2002 due to
cash flow constraints.
1998 STOCK INCENTIVE PLAN
During October 1998, the Board of Directors approved, subject to
stockholder approval, the 1998 Stock Incentive Plan (the "Plan"), and the
Company's shareholders approved the Plan in December 1998.
The purpose of the Plan is to advance the interests of the Company and
its subsidiary by enhancing their ability to attract and retain employees and
other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiary, through
ownership of shares of stock of the Company and cash incentives. The Plan is
intended to accomplish these goals by enabling the Company to grant awards in
the form of options, stock appreciation rights, restricted stock or
unrestricted stock awards, deferred stock awards, or performance awards (in
cash or stock), other stock-based awards, or combinations thereof, all as more
fully described below. Up to 750,000 shares of stock may be issued under the
Plan.
GENERAL
The Plan is administered, and awards are granted, by the Company's Board.
Key employees of the Company and its subsidiary and other persons or entities,
not employees of the Company and its subsidiary, who are in a position to make
a significant contribution to the success of the Company or its subsidiary are
eligible to receive awards under the Plan. In addition, individuals who have
accepted offers of employment from the Company and who the Company reasonably
believes will be key employees upon commencing employment with the Company are
eligible to receive awards under the Plan.
STOCK OPTIONS. The exercise price of an incentive stock option granted
under the Plan or an option intended to qualify for the performance-based
compensation exception under Section 162(m) of the Code may not be less than
100% of the fair market value of the stock at the time of grant. The exercise
price of a non-incentive stock option granted under the Plan is determined by
the Board. Options granted under the Plan will expire and terminate not later
than 10 years from the date of grant. The exercise price may be paid in cash
or by check, bank draft or money order, payable to the order of the Company.
Subject to certain additional limitations, the Board may also permit the
exercise price to be paid with Stock, a promissory note, an undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or a combination of the foregoing.
19
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SAR") may be
granted either alone or in tandem with stock option grants. Each SAR entitles
the holder on exercise to receive an amount in cash or stock or a combination
thereof (such form to be determined by the Board) determined in whole or in
part by reference to appreciation in the fair market value of a share of
stock. SAR may be based solely on appreciation in the fair market value of
stock or on a comparison of such appreciation with some other measure of
market growth. The data at which such appreciation or other measure is
determined shall be the exercise date unless the Board specifies another date.
If an SAR is granted in tandem with an option, the SAR will be exercisable
only to the extent the option is exercisable. To the extent the option is
exercised, the accompanying SAR will cease to be exercisable, and vice versa.
An SAR not granted in tandem with an option will become exercisable at such
time or times, and on such conditions, as the Board may specify.
On February 16, 1999, the Board approved an award to Ronald S. Boreta,
President of the Company, of SAR equal to 125,000 shares independent of any
stock option under the Company's 1998 Stock Incentive Plan. The base value of
the SAR shall be equal to $6 per share; however, no SAR may be exercised
unless and until the market price of the Company's common stock equals or
exceeds $10 per share. Amounts to be paid under this agreement are solely in
cash and are not to exceed $500,000. The SAR expires on October 26, 2008.
RESTRICTED AND UNRESTRICTED STOCK AWARDS: DEFERRED STOCK. The Plan
provides for awards of nontransferable shares of restricted stock subject to
forfeiture ("Restricted Stock"), as well as awards of unrestricted shares of
stock. Except as otherwise determined by the Board, shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable restriction period and the
satisfaction of any other conditions or restrictions established by the Board.
Other awards under the Plan may also be settled with Restricted Stock. The
Plan also provides for deferred grants entitling the recipient to receive
shares of stock in the future at such times and on such conditions as the
Board may specify.
OTHER STOCK-BASED AWARDS. The Board may grant other types of awards
under which stock is or may in the future be acquired. Such awards may
include debt securities convertible into or exchangeable for shares of stock
upon such conditions, including attainment of performance goals, as the Board
may determine.
PERFORMANCE AWARDS. The Plan provides that at the time any stock
options, SAR, stock awards (including restricted stock, unrestricted stock or
deferred stock) or other stock-based awards are granted, the Board may impose
the additional condition that performance goals must be met prior to the
participant's realization of any vesting, payment or benefit under the award.
In addition, the Board may make awards entitling the participant to receive an
amount in cash upon attainment of specified performance goals.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of April 7, 2008, the stock ownership
of each person known by the Company to be the beneficial owner of five percent
or more of the Company's common stock, each Officer and Director individually,
and all Directors and Officers of the Company as a group. Except as noted,
each person has sole voting and investment power with respect to the shares
shown.
20
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
-------------------- ---------------- --------
Ronald S. Boreta 650,484 (1) 18.6%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
ASI Group LLC (5) 637,044 (6) 18.2%
c/o Agassi Enterprises, Inc.
Suite 750
3960 Howard Hughes Parkway
Las Vegas, NV 89109
John Boreta 500,439 (2) 14.3%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Boreta Enterprises, Ltd. 360,784 (4) 10.3%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Vaso Boreta 3,853 (3) 0.1%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Robert R. Rosburg 35,383 --
49-425 Avenida Club La Quinta
La Quinta, CA 92253
William Kilmer 35,383 --
1853 Monte Carlo Way
Coral Springs, FL 33071
All Directors and Officers 725,103 (7) 20.7%
as a Group (4 persons)
___________________
(1) Includes 402,229 shares held directly and 248,255 shares which represents
Ronald Boreta's share of the Common Stock held by Boreta Enterprises Ltd.
(2) Includes 391,735 shares held directly, and 108,704 shares which
represents John Boreta's share of the Common Stock held by Boreta Enterprises
Ltd.
(3) Includes 28 shares held directly, and 3,825 shares which represents Vaso
Boreta's share of the Common Stock held by Boreta Enterprises Ltd.
(4) Direct ownership of shares held by Boreta Enterprise Ltd., a limited
liability company owned by Vaso, Ronald and John Boreta. Boreta Enterprises
Ltd. percentage ownership is as follows:
Ronald S. Boreta 68.81%
John Boreta 30.13%
Vaso Boreta 1.06%
21
(5) ASI Group LLC is a Nevada limited liability company whose members are
Andre K. Agassi and Perry Craig Rogers.
(6) All shares are owned directly.
(7) Includes shares beneficially held by the four named Directors and
executive officers.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes share and exercise price information about
the Company's equity compensation plans as of December 31, 2007:
----------------------------------------------------------------------------------------
Number of
securities remain-
ing available for
future issuance
Number of securi- under equity
ties to be issued Weighted-average compensation plans
upon exercise of exercise price of (excluding securi-
outstanding options, outstanding options, ties reflected
warrants and rights warrants and rights in column (a))
Plan Category (a) (b) (c)
----------------------------------------------------------------------------------------
Equity compensation -0- -- 750,000
plans approved by
security holders
----------------------------------------------------------------------------------------
Equity compensation -- -- --
plans not approved
by security holders
----------------------------------------------------------------------------------------
Total -0- -- 750,000
----------------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company provides administrative/accounting support for (a) The
Company Chairman's two wholly-owned golf retail stores, both named Las Vegas
Discount Golf and Tennis (the "Paradise Store" and "Rainbow Store"), b) three
golf retail stores, two of which are named Saint Andrews Golf Shop ("SAGS")
and the other is a Las Vegas Discount Golf and Tennis ("District Store"),
owned by the Company's President and his brother, and (c) SPEN until February
2005. One of the SAGS stores is the retail tenant in the CGC. Administrative/
accounting payroll and employee benefits are allocated based on an annual
review of the personnel time expended for each entity. Amounts allocated to
these related parties by the Company approximated $55,000 and $47,500 in 2006
and 2005, respectively.
The Company has various notes payable to the Paradise Store. These notes
are due in varying amounts on December 1 each year through year 2008. These
notes bear interest at 10% per annum and are secured by the assets of the
22
Company. The note payable and accrued interest payable balance at December
31, 2007 was $3,363,473 and $2,532,420, respectively. In December 2007, three
notes totaling $110,000 and the related party interest of $102,788 were to
mature but an extension was granted until June 30, 2008. The notes will
continue to accrue interest at 10%. In December 2006, four notes totaling
$220,000 and the related party interest of $223,651 were to mature but the
maturity dates were extended until March 31, 2007 and these notes will
continue to accrue interest at 10% per annum. These notes were also extended
until June 30, 2008. In December 2005, Vaso Boreta, Chairman of the Board and
owner of the Paradise Store, forgave the current note balance due then
including the related interest totaling $617,690, and also agreed to not
accelerate the maturities of the remaining notes due to these defaults.
In 2004, BE Holdings 1, LLC, which is owned by Vaso Boreta, Chairman of
the Board, advanced the Company $100,000 to fund operations. This note
accrues interest at 10% per annum and is payable out of available cash flows,
if any.
In 2005, SAGS loaned the Company approximately $445,000, to fund
operations, of which approximately $390,000 is due prior to December 31, 2005
and $55,000 is payable out of available cash flows, if any. Interest accrues
at 10% per annum.
Also in 2005, ANR, LLC ("ANR"), advanced the Company $800,000, to
complete the settlement of action involving Sierra SportService Inc. ANR is
owned by Andre K. Agassi and Perry Craig Rogers. Messrs. Agassi and Rogers
are also owners of ASI Group LLC, which is a principal shareholder of the
Company. The promissory notes representing these obligations are due on
demand and are personally guaranteed by Ronald S. Boreta, the Company's
President. Interest accrues at 5% per annum and the note including related
interest is payable on demand.
In 2006, SAGS loaned the Company approximately $140,000, to fund
operations and of this amount $75,000 was repaid during the year. Interest
accrues at 10% per annum on these notes. SAGS purchased a new telephone
system for the Company, the other SAGS store and the three Las Vegas Discount
and Tennis stores. The Company recorded a loan from SAGS for its portion of
the telephone system of $26,533 in November 2006 and this loan accrues
interest at 10% per annum. In addition in December 2006, the "District Store"
loaned $50,000 to the company for operations and interest accrues at 10% per
annum.
In 2007, SAGS loaned the company approximately $76,000, to fund
operations. The District Store loaned $135,000 to the company for operations.
Interest accrues at 10% per annum on these notes.
The Company's Board of Directors believes that the terms of the above
transactions were on terms no less favorable to the Company than if the
transactions were with unrelated third parties.
ITEM 13. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- -------------------------- ------------------------------
2 Agreement for the Purchase Incorporated by reference to
and Sale of Assets, as Exhibit 10 to the Registrant's
amended Current Report on Form 8-K
dated February 26, 1997
23
3.1 Restated Articles of Incorporated by reference to
Incorporation Exhibit 3.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.2 Certificate of Amendment Incorporated by reference to
to Articles of Incorporation Exhibit 3.2 to the Registrant's
Form SB-2 Registration Statement
No. 33-84024)
3.3 Revised Bylaws Incorporated by reference to
Exhibit 3.3 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.4 Certificate of Amendment Incorporated by reference to
Articles of Incorporation Exhibit 3.4 to the Registrant's
Series A Convertible Annual report on Form 10-KSB for
Preferred the year ended December 31, 1998
3.5 Certificate of Designation Incorporated by reference to
Series B Convertible Exhibit 3.5 to the Registrant's
Preferred Annual Report on Form 10-KSB for
the year ended December 31, 1998
3.6 Certificate of Amendment to Incorporated by reference to
Articles of Incorporation - Exhibit 3.6 to the Registrant's
Name change Annual Report on Form 10-KSB for
the year ended December 31, 1998
10.1 Employment Agreement Incorporated by reference to
with Ronald S. Boreta Exhibit 10.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.2 Stock Option Plan Incorporated by reference to
Exhibit 10.2 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.3 Promissory Note to Vaso Incorporated by reference to
Boreta Exhibit 10.11 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.4 Lease Agreement between Incorporated by reference to
Urban Land of Nevada and Exhibit 10.17 to the Registrant's
All-American Golf Center, Form SB-2 Registration Statement
LLC (No. 33-84024)
10.5 Operating Agreement for Incorporated by reference to
All-American Golf, LLC, Exhibit 10.18 to the Registrant's
a limited liability Form SB-2 Registration Statement
Company (No. 33-84024)
10.6 Lease and Concession Incorporated by reference to
Agreement with Exhibit 10.20 to the Registrant's
Sportservice Corporation Form SB-2 Registration Statement
(No. 33-84024)
24
10.7 Promissory Note of All- Incorporated by reference to
American SportPark, Inc. Exhibit 10.23 to the Registrant's
for $3 million payable to Annual Report on Form 10-KSB for
Callaway Golf Company the year ended December 31, 1998
10.8 Guaranty of Note to Incorporated by reference to
Callaway Golf Company Exhibit 10.24 to the Registrant's
Annual Report on Form 10-KSB for
the year ended December 31, 1998
10.9 Forbearance Agreement Incorporated by reference to
dated March 18, 1998 Exhibit 10.25 to the Registrant's
with Callaway Golf Annual Report on Form 10-KSB for
Company the year ended December 31, 1998
10.10 Promissory Note to Saint Incorporated by reference to
Andrews Golf, Ltd. Exhibit 10.10 to the Registrant's
Annual Report on Form 10-KSB for
the year ended December 31, 2005
10.11 Promissory Note to BE Incorporated by reference to
Holdings I, LLC Exhibit 10.11 to the Registrant's
Annual Report on Form 10-KSB for
the year ended December 31, 2005
10.12 Promissory Notes to Filed herewith electronically
BE District, LLC and
Saint Andrews Golf Shop Ltd.
during 2007
14 Code of Ethics Filed herewith electronically
21 Subsidiaries of the Incorporated by reference to
Registrant Exhibit 21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
23.1 Consent of L.L. Bradford Filed herewith electronically
& Company, LLC
31 Certification of Chief Filed herewith electronically
Executive Officer and
Principal Financial
Officer Pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification of Chief Filed herewith electronically
Executive Officer and
Principal Financial
Officer Pursuant to
Section 18 U.S.C.
Section 1350
25
ITEM 14. PRINCIPAL ACCOUNTANTS' FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed for each of the last two fiscal years ended
December 31, 2007 and 2006 by LL Bradford for professional services rendered
for the audit of the Company's annual financial statements and review of
financial statements included in the Company's quarterly reports on Form
10-QSB were $36,000 and $36,000, respectively.
AUDIT RELATED FEES
None.
TAX FEES
The aggregate fees billed for tax services rendered by L.L. Bradford tax
compliance and tax advice for the two fiscal years ended December 31, 2007 and
2006, were $5,000 and $5,000, respectively.
ALL OTHER FEES
None.
AUDIT COMMITTEE PRE-APPROVAL POLICY
Under provisions of the Sarbanes-Oxley Act of 2002, the Company's
principal accountant may not be engaged to provide non-audit services that are
prohibited by law or regulation to be provided by it, and the Board of
Directors (which serves as the Company's audit committee) must pre-approve the
engagement of the Company's principal accountant to provide audit and
permissible non-audit services. The Company's Board has not established any
policies or procedures other than those required by applicable laws and
regulations.
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
All-American SportPark, Inc
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of All-American
SportPark, Inc and Subsidiary (the Company) as of December 31, 2007 and 2006,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of All-
American SportPark, Inc and Subsidiary as of December 31, 2007 and 2006, and
the results of its activities and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1d to
the consolidated financial statements, the Company's current liabilities
exceed current assets and has incurred recurring losses, all of which raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 1d.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ L.L. Bradford & Company, LLC
L.L. Bradford & Company, LLC
April 11, 2008
Las Vegas, Nevada
F-1
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
ASSETS
2007 2006
---------- ----------
Current assets:
Cash $ - $ 44,914
Accounts receivable 5,667 5,446
Prepaid expenses and other 5,473 4,345
---------- ----------
11,140 54,705
Leasehold improvements and equipment, net 972,127 937,501
Other assets - -
---------- ----------
$ 983,267 $ 992,206
========== ==========
F-2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
2007 2006
----------- ----------
Current liabilities:
Bank Overdraft $ 53,473 $ -
Current portion of notes payable to
related parties 5,205,504 1,966,156
Current portion of other long-term debt 71,558 87,866
Interest payable to related parties 2,957,454 594,486
Accounts payable and accrued expenses 193,159 280,940
----------- ----------
8,481,148 2,929,448
Notes payable to related parties,
net of current portion 121,035 3,361,963
Other long-term debt, net of current portion - 71,558
Interest payable to related parties 31,666 1,902,300
Due to related parties 1,011,952 944,391
Deferred income - 6,667
Deferred rent liability 681,887 644,659
----------- ----------
10,327,688 9,860,986
----------- ----------
Minority interest in subsidiary - -
----------- ----------
Shareholders' equity deficiency:
Series B Convertible Preferred Stock,
$.001 par value, no shares issued
and outstanding - -
Common Stock, $.001 par value, 10,000,000
shares authorized, 3,502,000 and 3,502,000
shares issued and outstanding at
December 31, 2007 and 2006, respectively 3,502 3,502
Additional paid-in capital 13,677,008 13,327,173
Deficit (23,024,931) (22,199,455)
----------- -----------
(9,344,421) (8,868,780)
----------- -----------
$ 983,267 $ 992,206
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
----------- -----------
Revenues $ 2,238,658 $ 2,207,979
Cost of revenues 641,934 597,763
----------- -----------
Gross profit 1,596,724 1,610,216
----------- -----------
Operating expenses:
Selling, general and administrative 2,099,458 2,066,560
Depreciation and amortization 82,442 74,828
----------- -----------
Total operating expenses 2,181,900 2,141,388
----------- -----------
Operating loss (585,176) (531,172)
Interest expense, net (541,270) (504,547)
Gain on Extinguishment of Debt - (11,033)
Other income loss 300,970 (812)
----------- -----------
Loss before minority interest (825,476) (1,047,564)
Minority interest in loss of subsidiary - -
----------- -----------
Net loss $ (825,476) $(1,047,564)
=========== ===========
NET LOSS PER SHARE:
Basic and diluted net loss per share $ (0.24) $ (0.30)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL DEFICIT TOTAL
--------- ----------- ------------ ------------
Balances,
January 1, 2006 $ 3,400 $13,306,875 $(21,151,901) $(7,841,626)
Stock issuance 102 20,298 20,400
Net loss (1,047,554) (1,047,554)
-------- ----------- ------------ -----------
Balances,
December 31, 2006 $ 3,502 $13,327,173 $(22,199,455) $(8,868,780)
Capital contribution
in the form of debt
extinguishment 349,835 349,835
Net loss (825,476) (825,476)
-------- ----------- ------------ -----------
Balances,
December 31, 2007 $ 3,502 $13,677,008 $(23,024,931) $(9,344,421)
======== =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (825,476) $(1,047,554)
Adjustment to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 82,442 74,828
Bad debts - 11,033
Stock based compensation - 20,400
Increase in operating (assets) and
liabilities:
Accounts receivable (221) (2,782)
Prepaid expenses and other assets (1,128) 23,017
Accounts payable and
accrued expenses (87,781) 57,603
Interest payable to related parties 492,334 480,964
Decrease in deferred income (6,667) 6,667
Increase in deferred rent liability 37,228 48,175
---------- -----------
Net cash used in
operating activities (309,269) (327,648)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets (117,068) (41,319)
Proceeds from sale of stock - 113,967
---------- -----------
Net cash provided by (used in)
investing activities (117,068) (72,648)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank overdraft $ 53,473 $ -
Increase in due to related parties 501,396 224,185
Proceeds of loan from related parties 121,876 216,522
Principal payments on notes payable
related parties (207,456) (75,000)
Principal payments on other
notes payable (87,866) (79,957)
---------- -----------
Net cash provided by
financing activities 381,423 285,750
---------- -----------
NET INCREASE IN CASH (44,914) 30,750
Cash, beginning of year 44,914 14,164
---------- -----------
Cash, end of year $ - $ 44,914
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 12,134 $ 20,043
========== ===========
SCHEDULE OF NON-CASH FINANCING ACTIVITY:
Capital contributions in the form of
debt extinguishment $ 349,835 $ -
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of All-American SportPark, Inc.
("AASP"), include the accounts of AASP and its 65%-owned subsidiary, All-
American Golf Center, Inc. ("AAGC"), collectively the "Company". Urban Land
of Nevada, Inc. ("Urban Land") owns the remaining 35% of AAGC. All
significant intercompany accounts and transactions have been eliminated. The
Company's business operations consists solely of the Callaway Golf Center
("CGC") are included in AAGC.
b. BUSINESS ACTIVITIES
The CGC includes the Divine Nine par 3 golf course fully lighted for night
golf, a 110-tee two-tiered driving range, a 20,000 square foot clubhouse which
includes the Callaway Golf fitting center and two tenants: the St. Andrews
Golf Shop retail store, and a restaurant.
Because our business activities are not structured on the basis of different
services provided, the above activities are reviewed, evaluated and reported
as a single reportable segment. The Company is based in and operates solely
in Las Vegas, Nevada, and does not receive revenues from other geographic
areas although its tourist customers come from elsewhere. No one customer of
the Company comprises more than 10% of the Company's revenues.
c. CONCENTRATIONS OF RISK
The Company has implemented various strategies to market the CGC to Las Vegas
tourists and local residents. Should attendance levels at the CGC not meet
expectations in the short-term, management believes existing cash balances
would not be sufficient to fund operating expenses and debt service
requirements for at least the next 12 months.
d. GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
accompanying consolidated financial statements, for 2007 and 2006, the Company
had net loss of $825,476 and $1,047,564, respectively. As of December 31,
2007, the Company had a working capital deficit of $8,470,008 and a
shareholders' equity deficiency of $9,344,421.
AASP management believes that its continuing operations may not be sufficient
to fund operating cash needs and debt service requirements over at least the
next 12 months. As such, management plans on seeking other sources of funding
including the restructuring of current debt as needed, which may include
Company officers or directors and/or other related parties. In addition,
management continues to analyze all operational and administrative costs of
the Company and has made and will continue to make the necessary cost
reductions as appropriate. The inability to build attendance to profitable
levels beyond a 12-month period may require the Company to seek additional
F-7
debt, restructure existing debt or equity financing to meet its obligations as
they come due. There is no assurance that the Company would be successful in
securing such debt or equity financing in amounts or with terms acceptable to
the Company.
Nevertheless, management continues to seek out financing to help fund working
capital needs of the Company. In this regard, management believes that
additional borrowings against the CGC could be arranged although there can be
no assurance that the Company would be successful in securing such financing
or with terms acceptable to the Company.
Among its alternative courses of action, management of the Company may seek
out and pursue a business combination transaction with an existing private
business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. There is no assurance that the
Company will acquire a favorable business opportunity through a business
combination. In addition, even if the Company becomes involved in such a
business opportunity, there is no assurance that it would generate revenues or
profits, or that the market price of the Company's common stock would be
increased thereby.
The consolidated financial statements do not include any adjustments relating
to the recoverability of assets and the classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
e. ESTIMATES USED IN THE PREPARATION OF FINANCIAL STATEMENTS
Preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that may require revision in future periods.
f. CORRECTION OF AN ERROR - PRIOR PERIOD ADJUSTMENTS
On March 10, 2008, the President and Principal Financial and Accounting
Officer of All-American SportPark, Inc. (the "Company") concluded that the
previously issued financial statements contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2006, and its Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 2007; June 30, 2007
and September 30, 2007 should not be relied upon because of the accounting
errors contained therein. In particular the Company had determined that it
had not correctly accounted for its land lease in accordance with Statement of
Financial Accounting Standards No. 13 - Accounting for Leases ("SFAS 13").
SFAS 13 provides that operating leases with fixed rent escalations should be
recognized on a straight-line basis over the lease term.
Amendments have been filed to restate the previously issued financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. STOCK BASED COMPENSATION
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
("SFAS 123R"), Share-Based Payment. This statement replaces SFAS 123,
Accounting for Stock-Based Compensation, and supersedes Accounting Principles
Board's Opinion No. 25 ("ABP 25"), Accounting for Stock Issued to Employees.
The Company implemented "SFAS 123R" as of December 31, 2005 as required by the
standard. SFAS 123R requires the Company to measure the cost of employee
F-8
stock-based compensation awards granted based on the grant date fair value of
those awards and to record that cost as compensation expense over the period
during which the employee is required to perform services in exchange for the
award (generally over the vesting period of the award). Since all the
Company's outstanding employee stock options are all fully vested and none
fall under Accounting Principles Board Opinion No. 25, the adoption of SFAS
123R's fair value method did not have any impact on the Company's financial
statements with regard to currently outstanding options.
b. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment (Note 5) are stated at cost.
Depreciation and amortization is provided for on a straight-line basis over
the lesser of the lease term (including renewal periods, when the Company has
both the intent and ability to extend the lease) or the following estimated
useful lives of the assets:
Furniture and equipment 3-10 years
Leasehold improvements 15-25 years
c. ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs charged
to continuing operations amounted to $35,200 and $28,200 in 2007 and 2006,
respectively.
d. REVENUES
Lease and sponsorship revenues are recognized as appropriate when earned.
Substantially all other revenues including golf course green fees, driving
range ball rentals and golf cart rentals, are recognized when received as they
are payments for services provided on the same day.
e. COST OF REVENUES
Cost of revenues is primarily comprised of golf course and driving range
employee payroll and benefits, operating supplies (e.g., driving range golf
balls and golf course score-cards, etc.), and credit card/check processing
fees.
f. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist principally of
management, accounting and other administrative employee payroll and benefits,
land lease expense, utilities, landscape maintenance costs, and other expenses
(e.g., office supplies, marketing/advertising, and professional fees, etc.).
g. IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, including property and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the long-lived asset may not be recoverable. If the long-
lived asset or group of assets is considered to be impaired, an impairment
charge is recognized for the amount by which the carrying amount of the asset
or group of assets exceeds its fair value. Long-lived assets to be disposed
of are reported at the lower of the carrying amount or fair value less cost to
sell. Long-lived assets were evaluated for possible impairment and determined
not to be impaired as of December 31, 2007.
F-9
h. LEGAL DEFENSE COSTS
The Company does not accrue for estimated future legal and related defense
costs, if any, to be incurred in connection with outstanding or threatened
litigation and other disputed matters but rather, records such as period costs
when the services are rendered.
i. Recent Accounting Policies
In September 2006, the FASB issued FASB Statement No. 157, "Fair Value
Measurements" (SFAS 157). The standard provides guidance for using fair value
to measure assets and liabilities. The standard also responds to investors'
requests for expanded information about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair
value, and the effect of fair value measurements on earnings. The standard
applies whenever other standards require or permit assets or liabilities to be
measured at fair value. The standard does not expand the use of fair value in
any new circumstances. SFAS 157 must be adopted prospectively as of the
beginning of the year it is initially applied. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. The Company is currently
evaluating the impact this standard will have on its consolidated financial
statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS 159). SFAS 159 allows
entities the option to measure eligible financial instruments at fair value as
of specified dates. Such election, which may be applied on an instrument by
instrument basis, is typically irrevocable once elected. SFAS 159 is effective
for fiscal years beginning after November 15, 2007, and early application is
allowed under certain circumstances.
The Company does not expect the adoption of SFAS 159 to have a material impact
on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141R) which replaces SFAS No. 141. SFAS 141R retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired
and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. SFAS 141R is
effective for the Company beginning January 1, 2009 and will apply
prospectively to business combinations completed on or after that date. The
Company does not expect the adoption of SFAS 141R to have a material impact on
its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB 51" (SFAS 160) which
changes the accounting and reporting for minority interests. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net income
attributable to the noncontrolling interest will be included in consolidated
net income on the face of the income statement and, upon a loss of control,
the interest sold, as well as any interest retained, will be recorded at fair
F-10
value with any gain or loss recognized in earnings. SFAS No. 160 is effective
for the Company beginning January 1, 2009 and will apply prospectively, except
for the presentation and disclosure requirements, which will apply
retrospectively. The Company does not expect the adoption of SFAS 160 to have
a material impact on its consolidated financial statements.
3. LOSS PER SHARE
Loss per share is computed by dividing reported net loss by the weighted
average number of common shares outstanding during the period. Common
equivalent shares are not used to compute a diluted loss per share because to
do so would be anti-dilutive for the period ending December 31, 2007 and 2006.
The weighted-average number of common shares used in the calculation of basic
loss per share was 3,502,000 and 3,502,000 in 2007 and 2006.
4. RELATED PARTY TRANSACTIONS
The Company provides administrative/accounting support for (a) two golf retail
stores wholly-owned by the Company's Chairman, both named Las Vegas Discount
Golf and Tennis (the "Paradise Store" and "Rainbow Store"), b) three golf
retail stores, two of which are named Saint Andrews Golf Shop ("SAGS")and the
other is a Las Vegas Discount Golf and Tennis ("District Store"), owned by the
Company's President and his brother, and (c) Sports Entertainment Enterprises,
Inc. until February 2005. One of the SAGS stores is the retail tenant in the
CGC. Administrative/accounting payroll and employee benefits are allocated
based on an annual review of the personnel time expended for each entity.
Amounts allocated to these related parties by the Company approximated $93,000
and $55,000 in 2007 and 2006, respectively.
The Company has various notes payable to the Paradise Store. These notes are
due in varying amounts on December 1 each year through year 2008. The notes
bear interest at 10% per annum and are secured by the assets of the Company.
The note payable and accrued interest payable balances at December 31, 2007,
were $3,363,473 and $2,532,420 respectively. Eric, do you want me to add 2006
interest and note payable? Currently I am just showing 2007. In December
2007, three notes totaling $110,000 with related party interest of $102,788
were to mature, but an extension was granted until June 30, 2008. The
interest will continue to accrue at 10%. In December 2006, four notes totaling
$220,000 and the related interest of $245,651 were to mature but the maturity
dates were extended until March 31, 2007 and these notes will continue to
accrue interest at 10% per annum. These notes were also extended to June 30,
2008.
Also in 2004, BE Holdings 1, LLC, which is owned by Vaso Boreta, Chairman of
the Board, advanced the Company $100,000 to fund operations. This note
accrues interest at 10% per annum and is payable only out of available cash
flows, if any.
In 2007, SAGS loaned the company approximately $76,000, to fund operations.
The "District Store" loaned $135,000 to the company for operations. Interest
accrues at 10% per annum on these notes.
In 2006, SAGS loaned the Company approximately $140,000 to fund operations, of
which the entire balance is due prior to December 31, 2007 and interest
accrued at 10% per annum. The Company repaid $75,000 of these loans in August
of 2006. In 2005, SAGS loaned the Company approximately $445,000 to fund
operations, of which approximately $390,000 is due prior to December 31, 2006,
and an additional $55,000 is payable only out of available cash flows, if any.
These notes remain outstanding as of December 31, 2007. Interest continues to
F-11
accrue at 10% per annum. In December 2006, "District Store" loaned $50,000 to
the company for operations and interest accrues at 10% per annum.
Also in 2005, ANR, LLC ("ANR"), advanced the Company $800,000, to complete the
settlement of action involving Sierra SportService Inc. Andre K. Agassi and
Perry Craig Rogers own ANR. Messrs. Agassi and Rogers are also owners of ASI
Group LLC, which is a principal shareholder of the Company. The promissory
notes representing these obligations are personally guaranteed by Ronald S.
Boreta, the Company's President. Interest accrues at 5% per annum, and the
notes, including related interest, are payable on demand. The interest
payable as of December 31, 2007 is $84,250
Aggregate maturities of related party notes and the related accrued interest
payable for the five years subsequent to December 31, 2007, are as follows:
2008 8,162,958
2009 --
2010 --
2011 --
Thereafter 152,701
------------
$ 8,315,659
============
At December 31, 2007, the Company has no loans or other obligations with
restrictive debt or similar covenants.
5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment included the following as of December 31:
2007 2006
----------------- -----------------
Building $ 252,866 $ 252,866
Land improvements 540,098 450,390
Furniture and equipment 278,233 257,174
Signs 208,688 208,688
Other leasehold
improvements 332,700 326,400
Other 40,179 40,179
----------------- -----------------
1,652,764 1,535,697
Less accumulated
depreciation and
amortization (680,638) (598,196)
----------------- -----------------
$ 972,126 $ 937,501
================= =================
6. OTHER LONG-TERM DEBT
The Company has outstanding a promissory note payable to an unrelated party,
due in quarterly installments of $25,000 through September 2008 without
interest. This note has been discounted to reflect its present value.
F-12
Aggregate maturities of this obligation subsequent to December 31, 2007, are
as follows:
2008 71,558
-----------
Balance, which is net
of unamortized discount
of $3,442 $ 71,558
===========
7. LEASES
The land underlying the CGC is leased under an operating lease that expires in
2012 and has two five-year renewal options. In March 2006, the company
exercised the first of two options, extending the lease to 2018. Also, the
lease has a provision for contingent rent to be paid by AAGC upon reaching
certain levels of gross revenues. The Company recognizes the minimum rental
expense on a straight-line basis over the term of the lease.
The Company is obligated under various other non-cancelable operating leases
for equipment that expire over the next five years.
At December 31, 2007, minimum future lease payments under non-cancelable
operating leases are as follows:
2008 509,695
2009 509,695
2010 502,954
2011 481,673
Thereafter 521,812
----------
Total $2,525,829
Total rent expense for all operating leases was $486,060 for 2007 and $520,326
for 2006.
8. INCOME TAXES
Income tax expense (benefit) consists of the following:
2007 2006
------------ ------------
Current $ (280,662) $ (355,837)
Deferred 280,662 355,837
------------ ------------
$ - $ -
============ ============
The components of the deferred tax asset (liability) consisted of the
following at December 31:
F-13
2007 2006
------------ ------------
Deferred tax liabilities:
Temporary differences related to:
Depreciation $ (243,540) $ (206,571)
Deferred tax assets:
Net operating loss carryforward 6,846,752 6,566,090
Related party interest 1,010,379 842,645
Deferred income - 2,267
Deferred rent liability 231,842 219,184
Other - -
---------- -----------
Net deferred tax asset before
valuation allowance 7,624,997 7,215,837
Valuation allowance (7,624,997) (7,215,837)
---------- -----------
$ - $ -
========== ===========
As of December 31, 2007 and 2006, the Company has available for income tax
purposes approximately $20.1 and $19.3 million respectively in federal net
operating loss carryforwards, which may be available to offset future taxable
income. These loss carryforwards expire in 2019 through 2027. The Company
may be limited by Internal Revenue Code Section 382 in its ability to fully
utilize its net operating loss carryforwards due to possible future ownership
changes. A 100% valuation allowance has been effectively established against
the net deferred tax asset since it appears more likely than not that it will
not be realized.
The provision (benefit) for income taxes attributable to income (loss) from
continuing operations does not differ materially from the amount computed at
the federal income tax statutory rate.
9. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. CAPITAL STOCK
Urban Land has a 35% ownership interest in the Company's subsidiary, AAGC,
which owns and operates the CGC. In connection with the issuance of the 35%
interest in AAGC to Urban Land, the Company and Urban Land entered into a
Stockholders Agreement that provides certain restrictions and rights on the
AAGC shares issued to Urban Land. Urban Land is permitted to designate a non-
voting observer of meetings of AAGC's board of directors. In the event of an
uncured default of the CGC land lease, so long as Urban Land holds at least a
25% interest in AAGC, Urban Land will have the right to select one director of
AAGC. As to matters other than the election of Directors, Urban Land has
agreed to vote its shares of AAGC as designated by the Company.
There are no unusual rights or privileges related to the ownership of the
Company's common stock.
In October 2006, the Company issued a total of 102,000 share of common stock
to three persons in a private transaction. The shares were issued to two
members of the Company's Board of Directors and one employee in exchange for
their prior services to the Company. Since the shares were issued for prior
services, the Company expensed the stock issuance as director fees and bonus
expense based upon on the grant date fair value of the stock issued totaling
$20,400.
F-14
b. STOCK OPTION PLANS
The Company's Board of Directors adopted an incentive stock option plan in
1994(the "1994 Plan").
In 1996, 325,000 options were granted to the Company's President under the
1994 Plan at an exercise price of $3.06, the fair market value on the grant
date. These options expired unexercised in April 2001. Because of this
expiration, 325,000 new options were granted to the Company's President at an
exercise price of $0.055, the market value on the date of grant; these options
expired in April 2006.
In April 2000, 50,000 options were granted at an exercise price of $0.8125 per
share, the closing market price on the date of grant. These options expired
unexercised in April 2005.
In 1998, the Board of Directors and shareholders approved the 1998 stock
incentive plan (the "1998 Plan").
Pursuant to the 1998 Plan, in 1999, the Board of Directors of the Company
approved an award to the President of the Company, stock appreciation rights
("SAR") equal to 125,000 shares independent of any stock option under the
Plan. The base value of the SAR is $6 per share, however no SAR may be
exercised unless and until the market price of the Company's common stock
equals or exceeds $10 per share. Amounts to be paid under this agreement are
solely in cash and are not to exceed $500,000. The SAR will expire on October
26, 2008.
In 1998, Urban Land of Nevada Inc. (Urban Land) (Note 10), the landlord of the
property underlying the CGC, was granted 75,000 stock options. These options
are exercisable at $4.00 per share through the year 2008. 10,000 of these
options vested upon grant of the options, and 10,000 per year thereafter until
fully vested.
A summary of changes in the status of the Company's outstanding stock options
for the years ended December 31, 2007 and 2006 is presented below:
2007 2006
----------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------------------- ----------------------
Beginning of year 75,000 $ 4.00 400,000 $ 4.00
Granted - - - -
Exercised - - - -
Forfeited - - - -
Expired - - (325,000) -
----------------------- ----------------------
End of year 75,000 $ 4.00 75,000 $ 4.00
======================= ======================
Exercisable at
end of year 75,000 $ 4.00 75,000 $ 4.00
======================= ======================
F-15
The following table summarizes information about stock options outstanding at
December 31, 2007:
Options Outstanding Options Exercisable
------------------------------------- ---------------------
Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life (Years) Price Exercisable Price
-------- ----------- ------------- --------- ----------- --------
$4.00 75,000 1.00 $ 4.00 75,000 $ 4.00
10. LEGAL MATTERS
The Company was plaintiff in a lawsuit against Western Technologies and
was awarded a judgment of $660,000 in March 2003. Western Technologies had
appealed the judgment to the Nevada Supreme Court (the "Court"). Western
Technologies was required to and did file a bond in the amount of the judgment
to date, which was approximately $1,180,000 including the judgment, interest,
and attorney's fees. In October 2006, the "Court" ruled in favor of the
defendant, but it wasn't until August 2007 that an agreement was reached and
all parties signed a Settlement Agreement. The company received a total of
$550,000 and a net after attorney's fees of $300,000, which was used to finish
repairs on the facility and for some upgrades. The Company recorded this
settlement as part of other income.
On May 31, 2005, Sierra SportService, Inc. the Company's tenant, who
operated the restaurant in CGC, ceased operations. Sierra SportService filed
a notice of default pertaining to the restaurant concession agreement and
against all guarantors of that agreement. A settlement was reached on
November 18, 2005 for a total amount of $800,000, of which the AASP paid
$700,000 and the remaining $100,000 was paid by AAGC, which is 65% owned by
the Company. The funds used to make these payments were borrowed from ANR,
LLC, an entity owned by Andre K. Agassi and Perry Craig Rogers.
In December 2005, the Company commenced an arbitration proceeding before
the American Arbitration Association against Urban Land of Nevada ("Urban
Land") seeking reimbursement of the $800,000 paid in settlement of the Sierra
SportService matter plus fees and costs pursuant to the terms of the Company's
agreements with Urban Land which owns the property on which the CGC is
located. Urban Land filed a counterclaim against the Company seeking to
recover damages related to back rent allegedly owed by Company of
approximately $600,000. In addition, Urban land claims the Company misused an
alleged $880,000 settlement related to construction defects lawsuits. An
arbitrator has been appointed in the American Arbitration Association and
arbitration is scheduled for July 2008.
Urban land has also filed another lawsuit against the Company and claims
against other parties in the arbitration proceeding. The claims against the
Company remain essentially identical to the claims above. The other parties
include, among others, Ronald S. Boreta, the President of the Company; Vaso
Boreta, Chairman of the Board of the Company; and Boreta Enterprise, Ltd., a
principal shareholder of the Company. The other party claims allege that the
Company and others defrauded otherwise injured Urban Land in connection with
Urban Land entering into certain agreements in which the Company is a party.
The Company has filed a motion to dismiss against the plaintiff's claims in
this lawsuit but the Court provided the plaintiff with a limited amount of
discovery. The discovery process began in 2007 and depositions were taken in
September.
F-16
On February 10, 2006, Urban Land filed a notice of default on the CGC
ground lease claiming that certain repairs to the property had not been
performed or documented. The Company filed a lawsuit to prevent Urban Land
from declaring the Company in default of its lease. These claims in the notice
of default have been added in the above arbitration proceeding. A Summary
Judgment was awarded to the Company in February 2008 by the Court. Urban Land
has requested that the Court review the decision and a hearing on that matter
is scheduled for July 14, 2008.
F-17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Dated: April 15, 2008 By:/s/ Ronald S. Boreta
Ronald S. Boreta, Chief Executive
Officer (Principal Executive Officer
and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Vaso Boreta Chairman of the Board April 15, 2008
Vaso Boreta and Director
/s/ Ronald S. Boreta President (Chief April 15, 2008
Ronald S. Boreta Executive Officer),
Treasurer (Principal
Financial Officer)
and Director
________________________ Director
Robert R. Rosburg
/s/ William Kilmer Director April 15, 2008
William Kilmer